The value of tax shields is not equal to the present value of tax shields: a correction


Abstract I correct some expressions of Fernandez (2004) and provide a more general expression for the value of tax shields. This expression is the difference between the present values of two different cash flows, each with its own risk: the present value of taxes for the unlevered company and the present value of taxes for the levered company. The value of tax shields in a world with no leverage cost…
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From PricewaterhouseCoopers Professor of Corporate Finance University of Navarra - IESE Business School, Spain
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